"CHENEY: DEFICITS DO MATTER"... DAVOS INTERVIEWS
From the AlwaysOn NewsTeam

At the World Economic Forum held in Davos earlier this year, one of the most anticipated keynote speakers was Vice President Dick Cheney. The Vice President began his speech by striking an optimistic note, citing the capture of Saddam Hussein, the adoption of a democratic constitution in Afghanistan, and Libya’s decision to stop pursuing weapons of mass destruction as hopeful signs of progress.

In his speech, Cheney included this assessment of the Muslim world: "We are told that the culture and beliefs of Islamic people are somehow incompatible with the values…of freedom and democracy. These claims are condescending and they are false. Many of the world’s Muslims today live in democratic societies…The desire for freedom is not just American or Western; it is universal."

This remark prompted the first question to be asked by an audience member in the open session held after Cheney’s speech:

Question: I’m…from Oman. Thank you for those warm words about the Islamic and the Arab world. May we ask, Mr. Vice President, would you be so kind as to ensure that they are [conveyed] to Secretary Ashcroft and those who work for him, so that visitors from our region are treated with greater discretion and sensitivity when they visit your wonderful country? Thank you sir.

Cheney: I will certainly be happy to pass on messages to my colleague, John Ashcroft. There’s no question that we have tried to improve and tighten up our entry and exit procedures in the United States. We are aware that there are still glitches in the system; that it is sometimes an onerous process. And we’re doing our best to improve upon it.

Question: Fred Bergsten from the Institute for International Economics. I think it’s fair to say there has been enormous admiration expressed here this week about the strength of the U.S. economy, particularly the recovery that is now clearly underway. But there has been one nagging question about the sustainability of that recovery and that relates to the outlook for the U.S. budget position. In fact, there have been several questions about a comment made by your former colleague Paul O’Neill in his new book, when he quotes that famous meeting that he and Chairman Greenspan had with you, when he recounts you as saying "President Reagan showed that budget deficits don’t matter." Could you comment as to whether that is the philosophy and how you intend to overcome that concern?

Cheney: I guess the way you could look at that whole exercise is that I’m not the best personnel officer in the world. [laughter] The President took my advice on Secretary of the Treasury…of course as part of that he put me in charge of the search for the Vice President and that came out in unexpected ways as well. I believe deficits do matter, but also I am a great believer in the policy we followed. That is to say that it was very important for us to reduce the tax burden on the American economy by way of stimulating growth. The progress we see today with respect to our economy is directly related to that.

Paul did not support the tax cuts that I favored and that the President ultimately decided upon. And that really goes to the heart of the debate. I do think deficits matter; they matter in the long term. We do have to worry about them. Our plan, as the President laid out the other night in the State of the Union speech, is to reduce the deficit in half over the next five years. I think we’ll get there.

If you look at the deficit today, while it’s large, is not that large from a historic standpoint as a percentage of GDP. We think it is manageable, especially given the state we’re in. We’re engaged in a military conflict; we’ve had to increase defense spending. We inherited a recession which caused a falloff in government revenues. So for a lot of reasons, I don’t find it surprising that we have a deficit.

But in terms of trying to move back to a balanced budget, that clearly will be our long-term goal and objective, but we would not now move immediately to a balanced budget at the cost of adequately funding our military operations or having the kind of pro-growth policies that we think are vital to generating long-term revenues for the economy. We think we have it calibrated about right. I wouldn’t believe everything I read in Paul O’Neill’s book.

Question: We spoke yesterday about U.N. reform. You hinted at it in your own speech. Could you share with us what should be done in order to make the global institutional framework more effective?

Cheney: I could get into a lot of trouble right here, I’m sure. Well, from time to time there has been discussion about the need to modernize and update the U.N. The arrangements were settled on in San Francisco in 1945, nearly sixty years ago. We’ve got certain anomalies, I think, in that the structure of the United Nations as it’s currently constituted doesn’t necessarily fit with the way the world works and is organized today. There are major powers that are not represented or don’t have as much influence at the U.N. as they might have if this were 1945 and we were establishing those arrangements. I don’t want to get into any more detail than that. I don’t want to recommend specific changes on a national basis. Those are the kinds of issues that need to be worked out internationally.


In Part Two, Cheney gives his assessment of the security threats emanating from Iran and North Korea, and comments on Shimon Peres’ proposals for peace in the Middle East.